Becoming Data Driven

Boards need a data-driven organization

The rationale for having a board of directors is to incorporate multiple viewpoints into one group that is beholden to the interests of the stakeholders (stockholders, members, community, etc.) , and that can assure that the assets are protected and decisions are made for the benefit of those stakeholders.

Because the board is a group, there are multiple viewpoints represented, viewpoints on what should be a priority, what is the best strategy, how best to accomplish something, what are the external threats and opportunities, etc.

A key to success is assuring that decisions made are rational (def. based on logic or reason, conforming to that which can be validated). So, how do you insure that “rational” is the case? I would submit that it centers on becoming a data-driven organization.

Data-driven as an alternative to what?

Every board member has a viewpoint based on their own experience. For example, what they value or are most concerned about, what fellow stakeholders have expressed concern about, what their personal experience has been, etc.

organizational-metricsSo, if that is the case, how does a board decide on an issue? Well, often they decide based on who talks the longest and hardest or whether or not management is able to make a persuasive argument that trumps the individual viewpoints of board members. But, such a process is prone to lack consistency and logic. This is the alternative to being data-driven.

Data-driven organizations make their decisions re. priorities, use of resources, strategies, problems to be solved, program/product evaluation, etc. based on facts and trends that are apparent from an analysis of those facts.  To have facts, you need data.

Questions data can answer

  • What are the greatest needs of those we serve, our customers?
  • Which conditions are getting better for those we serve? Which are getting worse?
  • What services or products are generating the most demand? What are the trends with regard to demand?
  • What is the level of satisfaction with our services or products?
  • How does our cost per service compare with others?
  • Are our products/services having their intended impacts?
  • Are our strategies working?
  • What are the most frequently occurring problems?
  • What are the concerns of our stakeholders?
  • What is the level of turnover of our staff? How does it compare with peer organizations?

How to get there

First, each board member must pledge that they will surrender their view of what is true to what the data is telling them.

Second, the board must define a set of data or metrics (we call the sum of these data sets an Instrument Panel) that are unique for the organization and can be cost-effectively gathered to answer these questions.

Third, the board must insist that this data be presented to them on a regular basis in a format that displays the relevant trends, as you do not want to act on simply one month’s worth of data, but rather trends that are confirmed over a series of months.

Fourth, insist that when management is bringing you a matter for decision on any of the questions above or others, including your strategic plan, budget etc., that they are also bringing you the data that is relevant for that decision.

We offer workshops on how to become a data-driven organization as well as help setting up your own Instrument Panel and using it for decision making. For more information contact us.


The Value of Data

By Bill Dann, BoardGrowth Founder

Where’s the data?

One of my favorite tools that we produce at PGS is an Instrument Panel. Why? It is the tool to show a board not only the organization’s financial health, but the status of its core processes, progress toward its vision, satisfaction of its customers, etc. all on one page. In other words, it is a like the dashboard of a car – showing the status of the vehicle as a whole through the combined analysis of its various parts. It is an essential tool in the leader’s toolbox.

Unfortunately, the Instrument Panel is probably the most seldom asked for of our tools, and a challenging one. Of the few boards who have developed one, many have never fully realized its predictive power to improve/sustain performance. Whether you use our tool, a Balanced Scorecard or similar, the issue often seems to be the same.

My sense is that, in boards, this results from many board members not being adequately trained to analyze a variety of measures in such a way to give meaningful feedback, ask relevant questions and make sound decisions.  So they choose to not address measures as in depth as they should, if at all.

How can your board buck the trend? Let’s look at what to measure and how, to begin to breakdown the barriers.

What to measure and what not to

4-15 newsletterMany boards I have worked with have a good handle on the financials of the organization, though in some cases that is the first piece that is missing. However, regardless of the board’s skill at using them, financials are only part of the story.

Have you ever heard the expression that leading based solely on financial statements is like driving your car solely by looking in the rear view mirror? Financial statements present historical and point in time data, the results of work done. They are valuable in that they tell you about the past, what has happened and where you are financially.

But financial statements will not tell the board what dynamics in the organization are changing or point quickly enough to the need to do something differently. Financial statements don’t show you trends, the mindset of your customers and employees, or the health of critical processes.

More than financials

A solid instrument panel or similar group of measures looks at financial data in amongst other relevant data in order to show the whole picture of the organization. Further, a board benefits from a set of measures tailored to what the board is responsible for, while management analyzes its own set of measures. Some of the measures may be relevant for both group’s panels, but each group should carefully consider what will best enable them to do their job well.

The board’s instrument panel should consist of the following:

  • Outcome measures that assess progress toward the organization’s intended future and therefore the effectiveness of the processes management has implemented to get there
  • Strategic measures that are directed at the strategies chosen to grow your business or satisfy your stakeholders
  • Core process measures that assess the health of critical processes, so that the board can set policy for achieving and maintaining sound systems

How to measure: the value of trend data

W. Edwards Deming stated that there are only two mistakes you can make in managing, 1) not acting when you should, or 2) acting when you shouldn’t. These mistakes most often happen from lack of good data, particularly trends or data showing changes over time. A good set of measures should show you trend data.

Why? The board can be shown  a single data point and spot that something significant has happened, but they can’t answer the question re. whether or not to task management into action or to set policy. A single data point may be an anomaly, sourced in a one-time occurrence. Taking action, e.g. changing policy, changing strategy, changing leadership, all to avoid a repeat occurrence could be disastrous.

How do you know whether the change is a one-time anomaly or what Deming called a “structural change” that won’t reverse itself and needs to be responded to by a leadership action? The answer is that you need to look at multiple points of data, i.e., look at the trend or plot of the data points from month to month over the course of many months. If you see three straight months of data that concern you, then, likely a structural change in markets, customers or your systems/performance has occurred, and you need to deal with it.

Getting started

In order to have a good set of measures that will enable you to lead well, task management to develop 7-12 measures that include the outcome, strategic and core process measures described above. Ask, what is the board held accountable for? Do you have the data to back up the decisions you are making? If not, what data is missing? The answers to these questions should point you in the direction of a solid instrument panel for your board.

You will find that it takes discipline and a continued high confront level to use an Instrument Panel or any set of measures well during your board meetings. If you are struggling to get started, or if you have some measures in place but would like some tools to use them more effectively, contact us. We would be happy to help you get started or to give you some good analytical questions to help in utilizing your current measures better at no cost.


What’s Coming!

By Bill Dann, BoardGrowth Founder

Thank you – we heard you

Regular readers know that I recently queried you re. your views on why it is that there are so few folks out there surfing the Internet looking for how to educate or improve their boards.  You confirmed my findings and also offered some insights that I had not seen.

Those of you who know me well know I don’t give up easily, so I am going to try a new wrinkle.  Having tried to launch BoardGrowth as an on-line board development service with two different strategies, I want to try a new medium and see how that goes.

What to expect

My goal is to produce within the next two months an on-line course on “The Roles and Responsibilities of a Governing Board”.  Many of you have likely experienced this course delivered live.  My intent with the on-line course is to provide a resource to boards I have worked with that, like most boards, turn over a fair number of board members each year.  How can they get up to speed quickly with a common understanding of what the existing board members have already come to learn?  My intent is for this video to fill that void at less cost than repeating the training with a live trainer.

I am also interested to see whether such a video will find a market through various channels whereas BoardGrowth has not been able to find a market.

If all goes well, then I will develop additional course offerings on board development that follow the same structure as BoardGrowth, i.e. how to get to proficiency in each of the major responsibilities of a governing board.

Course content

The first course will cover the following:

  • The challenge and dilemma all board’s face.  Why good governance is so challenging.
  • An overview of the 10 major responsibilities/tasks of a governing board
  • What is micro-management and why board’s fall prey to it
  • The three tools needed to overcome micro-management
  • A quiz so that you can know whether you understand what this first course was to deliver
  • A board self-assessment to know where you need to improve
  • A micro-management assessment to determine if you have fallen into that trap

What to do?

If this course sounds like something you would be interested in, send me your thoughts, ideas or just a word of encouragement. I am much more likely to make it a priority knowing of your interest. You can reach me via e-mail.


Relationship Hygiene

By Bill Dann, BoardGrowth Founder

Hygiene? What Prompted This?

I recently spent a day with a board who had concurred with their CEO that the working relationship had deteriorated to a point that threatened the stability of leadership in an organization that had prospered of late.

I went through the usual steps of trying to assess what the source of the problem might be:

  • What are you concerned about?
  • What changes are you wanting to make happen?
  • Is there agreement on the role of the board?
  • Was the board micro-managing?
  • Are there clear policies in place to avoid misunderstandings and upsets?
  • Is it the politics of power that is destabilizing the board-CEO relationship?

My diagnosis was that none of these were major contributors. Yes, there were instances of micro-management, but the board quickly copped a plea of guilty on that one.

So, what was the diagnosis? Simply a lack of meaningful communication. Rather than either side communicating concerns, the concerns were gunny sacked and came out in the annual evaluation of the CEO. A common problem.

What do I mean by “Relationship Hygiene”?

communicateReaders who have spouses or significant others of long standing know that relationships take work. Misunderstandings abound. Tone of voice, facial expression, differing operating definitions of words all can lead to upsets. We try to stuff our concerns and withhold some honest communications in the spirit of trying to get along and not create upsets. The problem with that strategy is that these upsets are not forgotten, tend to accumulate and grow exponentially as we go forward until a boiling point is reached and a damaging exchange occurs that threatens to end the relationship.

This phenomena is not isolated to personal relationships, it occurs at work as well.

My Prescription

Adopt the practice of conducting an executive session at the close of very meeting. Have all staff but the CEO exit the meeting room and open the floor for board members, one at a time, to share what is on their mind as the meeting closes. Key questions to prompt discussion might include the following:

  • How did this meeting go?
  • How could it have gone better? What would you like to have had from your chair, your CEO, your fellow board members and yourself?
  • How is the CEO doing on the areas you asked for improvements in during the last evaluation?
  • Is your trust in the CEO rising or falling? Why or why not?
  • What concerns do you have about the organization that weren’t addressed on the agenda?
  • What rumors or customer/stakeholder concerns are not being addressed?

The CEO should be asked to provide his perspective on these same questions. What did he want from the board that he didn’t get? What comments/actions upset him or her?

Clearing the air and having honest communication is what I call relationship hygiene. It is a preventive action to eliminate build up of concerns/resentment that ultimately can explode.

The other reason I recommend this is that if you don’t have an executive session as a standard item on the agenda, then when you do have one, shock waves race through the organization that the CEO or someone else is in trouble and there is political treachery afoot. This, in turn, leads to loss of morale and production.

The End of the Story

So back to my client story. After going through the diagnostic checklist I listed above, we got into the specific concerns. Turns out that this group was in the top percentile in terms of best practices for governing boards. They were doing virtually everything right, had all the requisite tools for success. They just weren’t communicating.

There were some concerns about my recommendation re. executive session. They felt the need to confer with their attorney on it for various reasons we don’t need to get into.

We shall see whether my diagnosis and treatment plan is successful. However, I can say that with boards that have implemented this, I have seen huge benefits in terms of maintaining a productive board-CEO relationship.

What to do?

Give it a try. Even if your working relationship now is just super, still try this. It will maintain your super condition and even lead to improvements. Let me know how it goes so I can share what you learn with others. You can reach me via e-mail.


Board Development?

By Bill Dann, BoardGrowth Founder

By Way of Review

In the September issue I asked for a little help to understand why it was that BoardGrowth has never found a marketplace, why it is that searches on-line for resources on governance are a small fraction of those for a whole host of management topics.
The conundrum was and is, “why do the boards we work with in-house always value the training and profess they should have done it long ago and should continue it—but rarely do?”

Your Responses

Our thanks to several of you who responded and to many more who encouraged us to keep writing, keep developing materials, keep serving.

One of the responses:

“Here’s a reason you didn’t list: because people who become board members are usually successful in their chosen profession or field of expertise. To admit to what they don’t know is difficult, especially in front of other board members. When they’re approached to be on a board, they think, “Sure! How hard can that be?” They have no idea how to participate effectively unless they are mentored by an excellent and seasoned board member. That happens rarely. Add that to the busyness of their lives, and they aren’t motivated to commit to their own board development. The company/institution employees are busy with their own jobs, and the CEO often believes he/she needs to expedite operations. He/she often believes, just like board members do, that he/she knows best about the company/institution. He/she often also believes that the board interferes rather than guides, and thus may not be excited that the board actually learns how to become more involved. It’s a complex relationship all around.” 

Another offered this thought:

“How do you tell people what they don’t know and how to be more productive if they have never seen it? I suspect that you will have to find individual champions on boards and have them take your message to their groups and spread it from there.  I am/have been on a couple governing boards, and they can change if someone will put the energy into being the change agent.  Otherwise inertia will win.”

What to Make of It?

Well, the responses confirmed our suspicions. There are multiple reasons for the apathy in the governance training market.

Board-MeetingThe response re: CEOs viewing boards as a source of interference and thus having a conflict of interest in developing their boards, does ring true. I can remember during graduate school reading articles in respected healthcare journals that advised hospital administrators to keep the board in the dark so as to keep their options open and the road to progress open.

However, in my experience, when a CEO has a true partner in a governing board, progress is accelerated, the culture of the organization becomes more positive and flourishes.
Keeping the board “in the dark” becomes a self-fulfilling prophecy. Ultimately those boards will react and stop the wheels of progress. They come to the point where they refuse to budge after a steady diet of rubber stamping management proposals they don’t truly understand. This puts the CEO-board relationship and the organization at risk. It is at this point that the CEO seeks board training. I’ve encountered this many a time and often found that the training comes too late. Trust is broken and the whole affair ends badly.

A Final Word

There are four principles I have offered before, but will again repeat:

  • Investment in governance development is the best investment you can make
  • You will only go as far and fast as your board develops
  • The Chair-CEO partnership is key to success
  • Boards micromanage because they don’t have the right tools to execute their basic responsibilities: plan, set policy, evaluate

Further, its has been my consistent experience that every instance where a CEO has taken the lead in board development out of conviction that an effective board adds value has led to the development of a true leadership partnership that propels the organization forward.
So, we will press on to see if we can solve the conundrum. If any further thoughts come to mind, please contact us via e-mail.


Governance Innovation

By Bill Dann, BoardGrowth Founder

The Problem

An August 16 issue of The Economist magazine contained an interesting essay entitled “Replacing the Board”. The article repeated a judgment of many observers that the performance of governing boards “might politely be described as mixed.”

For some time, it was thought that more independent board members (i.e., not members of management or appointed by management) would be the solution. But though this has been widely practiced for some time, “there is no academic evidence to prove” that more independent boards improve performance.

The basic problem remains that “board members are part-timers with neither the knowledge nor the incentives to monitor companies effectively. And they are beholden to the people they are supposed to be monitoring. Boards are thus a showcase for capitalism’s most serious problems: they are run by insiders at a time when capitalism needs to be more inclusive and are dominated by part-timers at a time when it needs to be more vigilant about avoiding future crises”.

The Economist article addresses for-profit corporate boards, but I believe the same challenges await non-profits. There is a collapse on the horizon in the number of non-profits that will be dramatic. Government and philanthropic funding will force this because funders are increasingly looking to support based on performance, i.e. proven results. Thus, in a sense non-profits are entering a marketplace akin to the for-profit world.

An Innovative Proposal

The Economist article cites a proposal from the May edition of the Stanford Law Review for replacing individual directors with “professional-services firms” called Board Service Providers. Companies would hire these firms to provide governance services much like they hire law firms or management consultants now. These new firms would supply board members with the required expertise to monitor the company on an ongoing basis and also independently process large quantities of information to be used by the board for planning and evaluation.

The Board Services Providers would recruit board members in much the same way that search firms now recruit executives. They would also provide thorough training services, as they would be competing with other Providers for the reputation of being the best at governance. Further, experience across companies would allow for accumulation and dissemination of best practices.

The caution, of course, would be around confidentiality of information and ethics violations, but these challenges could be overcome.

This approach appears to have merit in my view. Our existing approach, having been tinkered with a good deal in the last 20 years, has not brought about a consistent and common reality of boards adding value to their organizations, but rather consistently being neutral at best in their effect on performance.

A More Modest Approach

Board Service Providers are not the sole answer, however. I have witnessed repeated instances in which a truly independent board member does bring the board as a whole to a new level. I have seen this in non-profits where members or stakeholders elect board members. Those stakeholders or members don’t have knowledge of what is needed to add value to the organization, hence the elections are based largely on personal politics.

I have also seen this on family or employee-owned enterprises where outside members bring new perspectives, challenge assumptions and question long-held practices.

It takes real skill for the independent or outside board member to create change within the board he or she has been appointed to without ruffling features or having board members who have been there for years not feeling invalidated and reacting to new input. However, when creating change does occur, governance improves dramatically and those who have been stuck for some time are actually relieved, become more motivated and more satisfied with their service on the board.

What to do?

So is the answer to seek for Board Service Provider agencies to help? Is it to seek out an independent board member? How do you go about ushering in new life and added value to your board?  If you are interested in injecting some new blood into your governance system, get in touch with us as to how to go about it. You can contact us via e-mail.


Looking for a little help

By Bill Dann, BoardGrowth Founder

The conundrum
About eight years ago, I thought I had a great idea. I had been doing training of governing boards for years and thought I saw the need for a different solution. Why? The cost of on-site training was high, and boards turn over at about 20-30% per year. So, an organization would have to bring in training fairly regularly in order to retain a common definition of the board’s role and a consistent level of governance performance amongst members.

“So,” I said to myself, “how about I develop an on-line board training service.” I had looked over Board Source, the current model of online training.  Though they had plenty of good materials, they lacked a cohesive program for board development. Rather than a clear path to get from A to Z, they seemed more of a scatter shot flood of materials for sale.

So, shortly thereafter BoardGrowth was launched as an on-line prescription service. Wrong price point, ineffective marketing – for a host of reasons – this first launch never took off.

We then tried a second launch in which folks could use free evaluation tools to determine areas of need and interest of their boards, and then cherry pick what materials they needed. Well, that didn’t go either. So, we pulled back from the market to try to figure it all out.

The conundrum was and is, “why do the boards we work with in-house always value the training and profess they should have done it long ago and should continue it—but rarely do?”

More fundamentally, it seems clear to many CEOs that a) their organization will only go as far and as fast as their board, and b) their board needs development. Yet, there is little market interest in governance training.

The unanswered question
This year we decided to try to sort this out and stop beating our heads against a wall. We stopped actively marketing BoardGrowth and stopped developing new materials. Then, we tried to answer the question.

First, we examined search engine data regarding governance. What we found is that the quantity of searches on the internet that are related to governance, boards, board training etc. are a mere pittance. In other words, there is no active market there.

Second, we offered the BoardGrowth materials free of charge to clients who were using us for live training in order to continue their development. The result? No one has taken us up on the offer.

Third, we tried surveying our clients about what form of additional training would work, i.e. webinars, a structured discussion of an article per board meeting, etc. Got no response.

Help us understand
So, the market is screaming at us, enough already. But, we still can’t connect the dots. We are sitting on this stack of materials that clients tell us are wonderful and needed, but we have yet to find the way to get them in use. We have some theories as to why, but would appreciate hearing from you as to what is true for you.

Here are our thoughts on what boards may be thinking:

  1. “We are pressed for time as it is to read the meeting packets and attend meetings. I can’t agree to  read additional materials between meetings.”
  2. “We often don’t get through our agendas as written. Adding an hour or two of training to an already packed agenda is not going to work.”
  3. “This type of training is only valued and effective in a retreat format and live.”
  4. “Training should be targeted to new board members as part of their orientation. Targeting sitting board members simply doesn’t fly.”
  5. “One book with all materials included is more palatable and easier to digest than individual articles and tools.”

Have I missed any? Which of these is most true for you?

Going Forward
As we get this sorted out, BoardGrowth will continue to sit rather dormant. I will still write these newsletters as they bring in good feedback and are read and valued by the audience. But I would very much appreciate your input on the rest of the materials. How can we best get needed tools and information into the hands of board members…and have them use it?

You can reach me <a href=””>via e-mail</a> or phone, (877) 276-4414 with your thoughts.

The CEO Evaluation Process

By Bill Dann, BoardGrowth Founder

Why is the CEO evaluation important?

Much of governance literature these days is devoted to “risk management”, i.e. assessing and dealing with factors that could de-stabilize a company financially or in terms of public relations.  My view is that the relationship between CEO and board is a significant potential risk factor.  Those of you who have gone through a CEO transition know that there is a waiting period in which there is hesitancy, progress (e.g. decision-making) is slowed until confidence is established, etc.

This is because the board has to rely on the CEO to 1) provide honest and complete information for planning, evaluation and decision making by the board, and 2) execute well the plans and policies of the board.

My consistent experience as a CEO and consultant over the years has been that, when this relationship goes well, the organization does well.  When its not going well, the entire culture of the organization is impacted and the focus turns from performance to politics.

The CEO evaluation process is the best means of assessing the quality of this working relationship and developing a plan to improve it.

The Tool Itself

There are many choices of evaluation tools boards can employ.  Any tool should be customized to reflect the purpose and nature of the organization. Beyond that basic customization, however, every CEO evaluation should contain a review of the following elements:

  • Quality of strategic planning
  • Execution on strategic agenda
  • Organizational performance as measured by key metrics
  • Management of assets
  • Culture of the organization: what its like to work there
  • Leading change
  • Public relations
  • Quality of the reports and inputs into decision-making by the board

In addition to raw scores on the quality of each area, there should be space for board members to input what it would take for the CEO to improve the score on the next evaluation.

Move beyond what was accomplished

Although evaluating what has happened in the past is essential, be sure to also include questions that address the following:

  • What did you want the CEO to deliver that didn’t get delivered?
  • What can the CEO do to gain greater confidence and trust of the board?
  • What goals for self-improvement would you suggest?

The evaluation process

To complete the process, i.e., gather evaluation scores from the board, collate the results and deliver them, there are a variety of options.  The first question is: which board members participate in the evaluation?  Often it is a task delegated to the executive committee because of their frequent interaction with the CEO.  You may decide you want the entire board to input into the evaluation, which is my recommendation.  It is important for the CEO to know where he/she stands with all board members. Many evaluation instruments are entirely web based, making full board participation simple.

I also suggest either the executive committee or full board review the raw results and then edit them to reflect the consensus of the group as well as the detail behind any outlier opinions.  Give the edited evaluation to the CEO in advance of meeting with him or her.  Instruct the CEO that you want his/her questions, reactions, and also recommendations on how the board can improve its performance and the working relationship.

Then, review the evaluation with your CEO in executive session, including an open discussion on the working relationship and the development of goals for both sides to achieve improved trust/confidence, and thereby performance.

The CEO should be given a copy of the finished evaluation.  The board chair should retain the organization’s copy in his/her files (which are passed on to the next chair).  Copies that were distributed to board members should be gathered and shredded at the close of the meeting with the CEO.

How Often?

This formal evaluation process should be completed each year.  In the successive years, questions on the instrument should include whether or not the CEO improved in the areas where goals for improvement were set during the previous evaluation.

At the 6-month interval, I recommend an executive session to go over whether both sides are making progress on the goals for improvement established in the last evaluation.

If you would like assistance implementing this vital piece of effective governance, contact us via e-mail. .

The Risks of Financial Projections

By Bill Dann, BoardGrowth Founder

A Wake Up Call

Of late, I have been seeing boards surprised because the financial performance of their organization is not matching the projections adopted in the plan/budget for the year.  Because they have not peeled below the projections to understand the assumptions behind them, they don’t know how to fix the problem.  “What did we miss and why? Is it marketplace changes we couldn’t control or foresee?  Is it a change in our competitive status in our markets, i.e. losing market share?  Is it poor execution by our management team?”

I once read a quote on governance that described attending a board meeting as “entering the on-ramp of an expressway at rush-hour”.  You had better move fast.  Meaning you need to rapidly understand what is before you and asked of you or risk being in the meeting for endless hours. “Rush-hour” represents the speed at which management wishes to move, and the pressure is on you to not impede their progress.  In short, the pressure is to rubber-stamp rather than question, probe and truly understand.

The Root of the Problem

The challenge here is that projections of how the company will perform are only as good as the assumptions behind them.  What will be our sales?  What will be our costs?  In the non-profit arena, there are assumptions about government or grant funding, assumptions on revenue for services rendered, etc. that drive the budget.

But, what was the basis for those projections, i.e. what are the assumptions about the future?  Did management just assume that trends from recent years will continue?  Was there any serious analysis of competitive factors that could make the future different and impact the company? Are new competitors moving into our market, are government contracts drying up, etc. Failing to see competitive or political threats can result in continuing your current level of costs without the revenue to cover them, with the result that you experience losses.

What to Do?

As always, the challenge for boards is that they often don’t have expertise of their own in the markets the company operates in.  For a non-profit, board members often don’t live in the grant/contract world every day.  So, the board has little independent knowledge of trends and must rely on management to do a sound job of monitoring and understanding these competitive factors and how much risk they pose to plans/projections.

Here are some suggestions on what boards can do to minimize the risk of relying on projections that are not based on sound assumptions:

  1. Consider bringing in an expert from your industry to either educate you on current trends or participate as an outside board member who can critically evaluate the assumptions in management’s projections.
  2. Insist that management undertake a serious strategic assessment using Michael Porter’s “Five Competitive Forces” or similar analysis in order to understand changes in the environment, evaluate their impact and more appropriately plan the organization’s strategies for the future.  Have the results of that assessment presented prior to considering any financial projections.
  3. Direct management to routinely deliver information on how you compare with the peers in your industry on such factors as costs of production, overhead, productivity, etc.  Get a sense of your status vs the industry leader, what the plans are to “catch” that leader, and what other competitors including the leader are doing to secure even more market share.
  4. Assess the risks associated with the financial projections/budget that you adopt.  Is that budget based on conservative, middle of the road or optimistic projections?

The upside

There is an upside to insisting on a clearer understanding of the assumptions impacting your bottom line financials.  Conducting an environmental analysis in order to more accurately forecast financial projections will reveal threats from your competitors, dwindling government contracts, etc. However, a good analysis will also surface solid opportunities to grow the organization and to benefit from a changing environment. If your board has been surprised by poor performance based on a shallow analysis that missed some real threats, chances are you may be missing some equally real opportunities.

We can help.  Give me a call (877) 276-4414 or an e-mail to find out how to bring a state-of-the-art strategic analysis to your organization as you prepare for your next fiscal year.


Weighing Risk

By Bill Dann, BoardGrowth Founder

Level of Risk

Every individual, and thus every group, has a certain level of tolerance for risk. For example, there are those of us who are gamblers, and those who hate to lose and never go near a slot machine or gaming table. These tolerances for risk come to the surface whenever governing boards consider new investments or changes in services.

The basic calculation is one of examining what is the potential gain from the investment or change, what would it cost to realize it and what is the probability of success.

Risk tolerance is usually determined by one’s experience with having taken risks. If you risk and lose, you tend to become risk adverse. At the other end of the spectrum are those entrepreneurs who love the rush of the risk and seek out new risks to a fault, leading to a destabilizing of the existing business.

I have worked with several boards of companies that have either come out of bankruptcy or come perilously close to it. In some cases, those board members are terrified to make an investment no matter how strong the evidence. This can greatly impair the ability of the company to grow.

What’s your board’s risk tolerance

On several occasions I have worked with boards who have sent their CEOs off looking for new opportunities with a strong directive to “grow the company”. The CEO does extensive due diligence on the opportunities only to find that none of them get approved. In those situations, there is a disconnection between the board’s desire to grow and their willingness to take a risk to make it happen. Without the latter, the former won’t happen.

In some cases, enormous amounts of time and energy were wasted on these wild goose chases. Eventually, the CEO would come back to the board in frustration and express that no more opportunities would be explored because the CEO had no idea what the board wanted. Each opportunity seemed to be rejected for different and inconsistent reasons. In one case, the CEO stated, “I would have been better off focusing on growing the business lines we already had”. Rightly so.

What To Do

To avoid this paralysis, we recommend that a board develop and adopt a policy on the criteria and standards it will use in considering new investment decisions. The process of getting there forces the board to confront different risk tolerances among themselves and then settle on a policy that everyone can be comfortable with. The dialogue has proved invaluable, and the tool a great time saver for management.

The tool itself involves defining criteria, i.e., what you want your investments to do for you (more on this below), the relative importance of each of these criteria, and then the specific standards that are used to score an investment, i.e. what it takes to score a 1,2,3,4 or 5 on a given criterion.

Sample Criteria to Consider

We suggest to clients that they always consider the following criteria:

  • Return on Investment
  • Time Until Positive Cash Flow
  • Level of Risk

The standards that are developed for each criterion are based on the unique situation of each organization. Other criteria might include a combination of the following:

  • Synergy with other investments
  • Ability to execute
  • Alignment with vision
  • Impact on employee development
  • Impact on community

Want Help?

If you are interested in developing this tool for your company, let us know. We would be happy to help. You can reach me at (877)276-4414 or via e-mail.


The Governance Toolkit

By Bill Dann, BoardGrowth Founder

Missing tools lead to micromanagement

Micromanagement occurs when the board inserts itself into management decisions without adding value, negatively impacting the organization by slowing decision-making. Readers of these newsletters know that micromanagement is considered a major issue in governance. You also know that it is my view that the source of micromanagement is either: a) the lack of trust in management, and/or b) a lack of good tools for the board to execute their responsibility. When the trust and/or tools are missing, the board engages in controlling small items that it can understand, i.e., micromanaging decisions.

In this month’s newsletter, I am focusing in on the tools a board needs to eliminate micromanagement. However, if you are interested in learning more about micromanagement, see our February 2013, April 2012, and June 2008 newsletters.

The board’s toolkit

Governing boards need effective tools to be able to efficiently execute on their primary responsibilities: setting direction, setting policy, evaluating results, and determining the need for changes in direction or policy. Though there are other responsibilities that fall on the board’s plate, e.g. hiring and evaluating CEO etc., these four are the major ongoing responsibilities for which a toolkit is needed. What are the key tools in that toolkit?

  • A clear, usable strategic plan
  • A set of metrics or measures to evaluate progress
  • Board administrative policies

The strategic plan

A good strategic plan includes a methodology to define key strategies for either growing the business (for profit) or improving services/outcomes (non-profit). This requires a solid assessment of the strategic environment of the organization, i.e., its competitors, their potential moves, the organization’s customers, new technology, etc.. Opportunities for growth and threats to current markets/services are identified and evaluated in the assessment. From there the strategy for growing or improving service can be developed.

The strategic plan should also include the identification of current performance strengths and weaknesses, and address any internal improvement projects (e.g. customer service, process improvement, employee retention) that will be critical to maintaining or improving market position.

The strategic plan is part of the informal contract between board and management. Performance on that contract is vital to maintaining trust in that relationship. Through the planning process both parties agree on what future changes are needed, management then commits to a series of targets for progress on those changes and executing on those commitments is one of the key basis for maintaining trust.

Ultimately, the board is responsible for the long-term viability of the business, so assuring that there is a sound strategy and a plan in place is critical. The board needs to monitor progress on the plan throughout the year and clearly understand the source of any failures to achieve milestones and targets.

Instrument panel of measures

Next, the board needs a set of metrics or measures that monitor the vital statistics of the business. Vital statistics include:

  • execution on key factors that distinguish the business from competitors (e.g. delivery time, support services, unique product features),
  • key processes or systems that determine overall performance,
  • financial metrics, and
  • the impact of strategies included in the strategic plan.

The set of measures, or Instrument Panel, must be uniquely designed for each organization. What this gives the board is trend data. Access to trend data will enable the board to avoid two key missteps: making a change when you shouldn’t or not making a decision when you should.

Board administrative policies

The board must put in place a set of rules that govern both their own activities and the boundaries for management. Policies governing the board define expectations of board members, set ethics boundaries, define roles and authorities of committees (in more detail than the bylaws) and cover administrative matters such as agenda setting, timing of delivery of board packets, travel, representing/speaking on behalf of the organization, a calendar for board functions, etc. Policies governing the relationship with management lay out the authorities granted to management to act independently.


Let’s look at what the impact of these tools are upon your ability to govern:

  • The strategic plan enables you to set future direction. If you don’t have it, then who is determining direction? If it is not you, then who is in control of the organization? If you have not defined what you want to have happen, then you have denied yourself a means to properly evaluate your CEO’s effectiveness and the means to assure future viability of the organization.
  • The instrument panel enables you to evaluate the performance of the organization and of the strategies you have chosen in your strategic plan. If you have no such measures, how can you know the direction of the organization? Looking at financial statements only tells you the ultimate impact of the trends going on inside and outside the company. As Deming once quoted, managing an organization by looking at historical data like financial statements is like driving a car looking at the rear view mirror. Without an instrument panel your decisions to change strategy or policy are likely to be too little too late, or too early and not needed.
  • The administrative policies assure that the organization runs according to how you wish it to run, i.e., that your corporate values are lived, that your board members fulfill their responsibilities and avoid ethical lapses, and that management operates within limits that you set. Without them, you are asking both board members and management to play a game without rules. In short, you are asking for chaos.

What to do?

Assess whether you have these basic tools in place and whether they are adequate. If you are not sure or you know that you need to put them in place, contact us. You can e-mail us or call at (877) 276-4414.


Board Work Plan

By Bill Dann, BoardGrowth Founder

The Current Reality
As I have talked about in previous issues, a major challenge for boards is to find the time to actually take control of the future vs. review/approve what has already occurred.  The national data shows that boards spend 60-70% of their meeting time on what has already occurred, i.e., CEO reports, finance reports, committee reports, minutes etc.  While it is important to learn from the past, devoting this much time robs you of the time needed to consider marketplace and customer conditions, develop strategy, develop plans to move forward, modify policy to meet changing conditions.

Words of Wisdom
Probably our most noted management author, Peter Drucker, wrote the following in his 800-page treatise entitled, Management:

“What is needed for an effective board is first careful thinking through of the top-management function and of the function and work of the board.  It requires objectives and a work plan for the board.  Unless the board is set up to discharge specific functions with clear objectives, it will not perform”

What’s Needed
First, via the chairman, the board needs to take control of the agenda through policy on agenda setting. The CEO and the chair should agree on the agenda based on their evaluation of what the board needs to understand and to take action on.

Second, the board needs to develop its own work plan.  It has been my observation that without such a plan, key responsibilities of the board are not done on a regular basis.  Review of bylaws, review of policy, review of customer satisfaction data, assessment of competitors and strategic environment, development of strategy and a plan to execute, risk management updates, evaluation of CEO, board evaluation, training plan, conducting training and on and on.

BG-news-3-14Begin the process by making a list of all the functions that must be completed by a board in order to become a board that truly adds value.  Then, determine the frequency with which these functions must be done, i.e. bylaws review need not be every year etc.  Then, estimate the time required.  Lastly, assign each of the functions to your scheduled board meetings or retreat.

Doing this will give the board a reality check on the enormity of their responsibilities and the need to streamline the methods used to handle reports and the like that portray what has occurred to date.  Those of you that have read previous newsletters or have been through our training know that we recommend the use of the Consent Agenda as a means to accomplish this.

If you would like to receive a copy of an article I wrote on Consent Agendas or if you need help laying out the list of responsibilities and developing your board calendar, feel free to contact us.


The Most Commonly Misunderstood Robert’s Rule

By Bill Dann, BoardGrowth Founder

Robert’s Rules

“Robert” refers to General Henry M. Robert who, in 1876, simplified the rules of procedure of the U.S. House of Representatives. The rules were subsequently adapted for use by ordinary societies or groups and ultimately became the “standard rules of order” for group meetings.

The rules strike a delicate balance between protection of the rights of a minority within the group vs. allowing the majority to proceed on without being held hostage by a minority.

Most boards somewhat informally adopt these rules, but don’t get proficient at them. In fact, many consistently violate the “rules”.

Why Robert’s Rules Matter

There are alternative sets of rules. Which one you adopt really doesn’t matter. However, not having adopted any set of rules does matter. Why?

As long as the group has consistently good intentions and does not attract to the board someone who seeks to bring them or the organization down, you will do fine. But, without rules of some sort, a board member with less than good intentions can have a chairman and a board as a whole wrapped around the axle. Another source of trouble is a less than well intended board member who is a Robert’s Rules expert. In either case, the outcome is lowered morale of the board, the management and staff. Remember, everyone in the organization is reading the dynamics of the board as a signal regarding how safe it is within the organization.

For those interested in learning the basic rules, send us an email, and we will forward you a BoardGrowth publication on it. For this newsletter, however, I want to highlight the most common error I encounter.

The most common error

The most common error centers on how the chair allows debate to be closed on a motion.  What I see most often is that a single member is recognized by the chair and then states, “I call for the question”.  The statement in itself is not in error, rather the error comes in what the chair does following the statement.  Most often, the chair interprets the call for the question as an end to the debate and begins a vote on the issue at hand. Incorrect.

Protecting the rights of members to continue debating a question is one of the basic tenets of Robert’s Rules.  The rules protect the rights of a minority to continue debating an issue in order to convince the other side of their position on the issue.  Closing debate essentially denies members that right.

The proper procedure

The correct handling of the statement  “Move the previous question” or “Call for the question” is for the chair to first ask for a second, then take a vote to close the debate, not a vote on the issue. Further, the vote to end the debate must carry with a two thirds majority, or the debate is considered to still be open. So without a second or a two thirds majority, debate is not closed.

The proper procedure requires that there must be a two-thirds vote to end debate, instead of one person being able do so by “calling for the question”.

Alternative procedures

Another option is for the chair to ask if there is any objection to the motion. This can be done before the motion is seconded. If there is no objection, then the chair can rule that debate has been closed and move on to vote on the motion on the floor. If there is an objection, then the chair should call for a second to the motion, move on to a vote on closing debate and then move on based on the vote on the motion.

What to do?

I recommend that you adopt a set of simple conventions from Robert’s Rules and stick to them. This provides a nice cadence to the meeting, enables everyone in the group to understand where they are on a question at a given moment. It also will serve you very well when times get tough, the debate contentious. Without it, chairmen often lose their nerve and control of the group. Loss of productivity and group morale quickly follows.


Too Lofty A Vision

By Bill Dann, BoardGrowth Founder

I recently reconnected with the former CEO of a long-standing strategic planning and board development client. He opined that one of the sources of the company’s decline was the board adopting too lofty (i.e. unrealistic) a vision.

Those of you familiar with our Vision Navigation® strategic planning process know that we borrow from the James Collins and Jerry Porras classic, Built to Last, recommending organizations adopt a BHAG (“Big Hairy Audacious Goal).  A good BHAG has a clear finish line, acts as a catalyst within the organization, aligns resources and calls the group to higher performance.

compassWell, the CEO explained that his board did just that, and it was indeed lofty. In this case, a revenue growth goal over a sustained period. However, he relayed that the vision was too lofty, putting pressure on subsidiary managers to manufacture projections that showed that they would achieve the target growth rate. My take is that it was not the vision that wrought the problem, but rather the failure to critically examine the assumptions behind the numbers and the true competitive position of each subsidiary.

It is possible to create a vision that is laughable or beyond reality for those tasked with achieving it. If you do so, it will be demoralizing rather than galvanizing.

What should have happened is that the board and leadership should have shifted their gears and gone to a higher level of performance to accompany the higher vision.

All of this strengthens my conviction that a critical examination of a company’s competitive position and the dynamics of its chosen marketplace are key to insuring a prosperous future. I commend all readers to examine the work of Michael Porter from the Harvard Business School who is regarded as the premier theorist on competitive strategy. Employing his approach to competitive analysis will insure that a vision (which should be re-evaluated each year) continues to serve the organization well.

If you have additional questions on this or would like reference information on Michael Porter, e-mail us, and we will get back to you the information you need.



Challenges for Non-Profits in Strategic Planning

By Bill Dann, BoardGrowth Founder

I came across an interesting piece of research via LinkedIn, summarizing a study on the biggest challenges faced by non-profits in completing strategic planning.  Here are the top four challenges:

  1. How to make goals, objectives, and other content concise and understandable for planning participants (mentioned by 61% of respondents).

  2. How to communicate clearly and concisely how the plan will lead to action (mentioned by 45%).

  3. How to carefully define expectations/process for participants on the front end (mentioned by 42%).

  4. How to best gather input from key stakeholders, employees (mentioned by 35%).

The data source for the above is the “Strategic Planning Practices Result in Higher Performing Nonprofits“, sponsored by the Association for Strategic Planning and the University of Arkansas, Department of Political Science.

Combining Challenge #1 and #2
My take on the first two challenges is that the answer to  #1 lies in #2. Here are the steps to take to eliminate those two challenges:

  • Break down projects into small enough bites or outcomes that you can know whether the project is going to be completed on time by knowing the status of each outcome.

  • State what is to be achieved in each project and the bite-size outcomes  as completions rather than a to-do’s, (e.g. “research report completed vs. “conduct research”).  That way, accountability is for a result or finished product, not simply to go into action.

  • Establish a deadline and a person accountable for each outcome in the plan.

If you lay out action steps as completions vs. activities , and you spell out who is accountable and by when, then you have an actionable, understandable plan.

Additional strategic planning challenges for non-profits
After viewing the challenges listed by the organizations, I would add these challenges in the mix:

  1. A culture of lack of accountability for results. CEOs don’t hold their people accountable, and boards don’t hold CEOs accountable.

  2. Board and management don’t evaluate whether their services are working for their clients. They resist metrics based on a rationale such as “you can’t measure the value of a human life”. Instead, they measure activity, i.e. how many clients and services, but this does not address whether the problem (health status, homelessness, abuse) they are trying to solve is getting better or worse.

  3. Board and management don’t assess competitors or alternative solutions sought by clients.  Rather, they self-righteously maintain that it is their domain.

Let me expand on these a bit.

Results vs. reasons
The biggest challenge for any organization, non-profit or otherwise, is to shift the culture from one of “reasons” to one of “results”.  By “reasons”, I mean, reasons why something didn’t get completed. There are always plenty of those.

But, let’s go back to the essence of a strategic plan.  If the strategic agenda is done correctly, then that agenda includes a list of the changes that are needed for the organization to prosper in the future.  Meaning, if you don’t execute on those changes, then you put your future at risk.  The agenda should be limited enough to be doable, and the work assignments should constitute no more than 10-20% of what any individual is expected to do.

The problem is that strategic projects are heaped upon what individuals are already expected to do, which is often challenging enough on its own.  Thus, you can’t really execute on the strategic agenda unless individuals find a way to a) improve their own productivity or b) empower others to handle some of their day-to-day responsibilities.

Without one of these two changes, there will be a litany of reasons given for why outcomes aren’t achieved.  The board, CEO and members of the management team have to challenge one another to go beyond “reasons” to “results”.

The impact of disempowered consumers
In non-profits, customers are very often disempowered. They are not paying full price for their services, can’t take their business elsewhere and thus can’t demand a certain level of service or result. This disempowering of the customer leads to a lack of performance and customer service discipline within many non-profits.

To overcome this, non-profits must actively seek dialogue with their customers. Customers are experiencing high performance organizations in the rest of their life.  Grocery stores, restaurants, auto mechanics, etc. all live in highly competitive markets, and those that prosper are performing at a high level for their customers.  Those same customers are comparing their experiences in high performance organizations with performance at a non-profit, and the non-profits are often coming up short.

Some simple questions to ask in determining where to make improvements include the following:

  • Were our clients’ expectations met?
  • How could outcomes and service have been improved?

Without good data on the customer experience, a suboptimal strategic plan will be created. The work of planning itself tends to not be as rigorous, because the organization can get by without fully satisfying its customers. The customers have little or no other choice.

Other challenges?
Although I agree that the original list of challenges poses a problem for non-profits seeking to achieve the best strategic plan possible, I believe those challenges are more easily overcome. The bigger obstacles that I run across are those challenges I listed above. These are the challenges that keep a non-profit from becoming a truly high-performance organization.

It would be interesting to survey consultants working with non-profits re. the challenges they see as relevant and critical.  I suspect you would see a different set of challenges than those posed by the organizations themselves.

Questions or thoughts? Send me an e-mail.



Responsibility to Inform Shareholders

By Bill Dann, BoardGrowth Founder

Working with a commission in the NW Arctic this week reminded me of a weakness that is common to many boards I have been involved with over the years, namely, the need for boards to be effective communicators to stakeholders.

What Responsibility Does this Address?

In teaching governing boards the basics on their responsibilities, I emphasize their responsibility to keep the organization safe from political attacks from within their shareholders or stakeholders.  It is both demoralizing and destabilizing for management and staff to be working hard, yet be under attack for reasons that are not founded in fact.

It is not uncommon within the shareholder or stakeholder ranks, that someone seeks to make a name for themselves or gain power by tearing down or creating doubt about an institution.  Unfortunately, it is all too easily done with a few juicy rumors.  Just look at the sales of the National Enquirer or other such magazines at supermarkets, and it tells you that we human beings gravitate to the negative.  Our reasoning? It seems safer to assume the worst than to assume and defend that “all is well”, only to be disappointed.

Shareholders or stakeholders, those whose interests are being represented by board members, must have confidence that their elected representatives are looking out for their interests and are competent.  When they sense that is not the case, attacks upon the organization easily arise.  The results are that a majority of the resources of management go into defending the organization rather than fulfilling the purpose and achieving the vision.

In essence then, it is up to the board members to defend the organization from such attacks.

How to be the defenseman-with-chart

Here are some of the ways in which board members fulfill this responsibility:

  1. Where feasible, meet with shareholders or stakeholders to report on progress and listen to their questions/concerns.

  2. Keep yourself well informed so that you can answer their questions.  If you can’t, and instead refer them to management, you instill a belief that you are not on top of things, not in control, unable to represent their interests.

  3. Insist via policy that management keep you informed so that you are ahead of the rumor mill.  Some of my clients have set a policy that they want a weekly email report from the CEO so that they remain in the loop.  This may be too frequent, but you do need some sort of policy here.

  4. Allow time on the agenda of your meetings to address shareholder/stakeholder concerns.

  5. Commit resources into an active shareholder/stakeholder relations program that maintains frequent and thorough communications.

  6. Establish a policy on how you are going to handle shareholder/stakeholder complaints.

  7. If you are elected by a body (e.g. a tribal council, neighborhood council), then be sure you are reporting back to those bodies regularly.  Establish a board policy that holds board members accountable to do this.  And, insist that management empower you with the information you need.

  8. Use technology where possible, e.g. a Facebook page, LinkedIn group, DropBox, to facilitate a two-way dialogue with your shareholder/stakeholders.

The Bottom Line

It is the responsibility of a board member to not only represent the interests of stakeholders and shareholders, but to keep them informed and up-to-date.  If you have additional questions on this or want assistance putting such a program in place, e-mail us,  and we will get back to you with some advice.



Using Metrics

By Bill Dann, BoardGrowth Founder

Hard data vs stories

Those of you with whom I have worked know that I am a strong advocate for basing your decisions and assessment of the condition of the organization on hard data vs. stories, rumors, gut feelings. The two mistakes you can make are not seeing that you are in trouble and need to take action, and falsely judging that you are in trouble and taking action when you should leave well enough alone.

Years ago I read a book entitled Breaking the Bank, by Gary Hector, that told the story of the near collapse of the Bank of America (at the time it’s assets were equal to that of the sixth largest country on the planet). The bank was leaking profits big time in its South American operations. Despite a board consisting of the best and brightest, the board took six years to act on the problem, resulting in the near collapse of the bank.

For years, management, including a series of CEOs, would offer a plan for turning things around only to find that the strategies did not work.  The board never got to an understanding of the root causes and then to a plan of action to address them.

I see boards struggle with this.  Their CEO’s have done well in the past, and directors don’t want to offend or communicate distrust, so they ride their trust line too long.  So, what to do?

Define vital statistics

Whether a for-profit or a non-profit entity, we recommend you work with management to develop a set of vital statistics or metrics that tell you the condition of the organization at any one time.  The data you select should be gathered and displayed monthly as trend data (a run chart).

In some cases you will want the data to go up (e.g. revenue) and in some cases down (overhead per unit of production).  The metrics you select will be unique for your organization based on your vision, characteristics that separate you from your competitors and vital systems that drive performance.

A normal condition would be slightly favorable statistics each month. Any condition other than that should prompt inquiry from the board as to why. Did the metric go up faster than in the past? Why? You may want to do more of whatever that is. Did it decline? What was the cause ? Ultimately you will want a solution to that problem.

What’s the approach?

It’s hard to know what the B of A board failed to do, but here is my take on what should happen in the boardroom:

  • organizational-metricsUpon seeing the first unfavorable data point, inquire of management as to their take on the cause and whether anything should be done about it.  If the answer and proposed action/inaction make sense to you, go with it.  If not, ask for more data or whatever action is appropriate.
  • Upon seeing the second straight unfavorable data point, ask the same questions, but be a bit more aggressive in getting to certainty that the organization understands the true “why” that explains what is occurring. Depending upon the importance of the metric and the slope of the decline, you may wish to initiate an independent investigation as to what is occurring. This would be the case after two negative data points in a row in only the severest cases.

An overreaction is what you are wanting to avoid here. It may be that you are experiencing normal down-trend cycles like a yearly seasonal downturn in revenue, unusually high expenses that occur at this time every year, bad weather impacts, etc.  In such cases, taking an action like cutting the marketing budget or lowering production could prove disastrous. You have to determine whether you are experiencing a normal, cyclical change or a structural change. A structural change  will not reverse itself, e.g.computers replacing typewriters or on-line shopping impacting retail.

  • Three negative data points in a row indicate a likely structural change. At this point, some action is going to be required. In all likelihood, the trend is not going to reverse itself, and you need to take action based on what is the new operating condition or market reality.

A common mistake that I see is a board governing based on projections without understanding what is behind those projections. Boards need to be aware of the assumptions behind a projection and their validity. That will be the subject of next month’s newsletter. For now, be sure you have metrics in place that will give you a heads up when conditions may be changing.

Drivers, not results

One more point, month end financial statements are not the metrics we are referring to here. They reflect the results of work already done, decisions already made. The metrics to track for this type of decision making are those that reveal what is happening to the drivers of the numbers on financial statements – sales efforts, product quality, customer service. W. Edwards Deming once said that running your business looking only at results is like driving your car using only the rear view mirror. Financial statements tell you what has happened, but are not a predictor of the future. Acting on them alone can be hazardous, as the data often comes to you too late to take appropriate corrective action.

Want a hand in development?

Are you interested in creating a set of metrics for your board and organization? We enjoy digging into the numbers with our clients to help them create the measures that matter in their ultimate decision making. We call it an Instrument Panel. If you would like assistance in putting together an Instrument Panel for your organization or learning how to use measures to evaluate your organization’s current status, drop us an e-mail.  We would be happy to help.



Addressing Turnover

By Bill Dann, BoardGrowth Founder

What’s the problem?

A 2013 study of Fortune 500 companies by Equilar found that 52% of them experienced board turnover in the past year.  The median turnover rate was 14%, the average was 18%.  I suspect the rate is much higher for non-profits, because their terms of office are often shorter. However, I was unable to find recent data for that sector.

Those of you familiar with my writings in BoardGrowth know that one of my tenants is that you will only progress as fast as your board. Likewise, within a group, you often progress only as fast as your weakest member.  While new blood is important to boards for innovating, it is also a set back to progress unless you have a thorough and proactive orientation program for new directors.

More than simply turnover, however, what’s concerning is the number of surveys that show that directors are often dissatisfied with their service on boards.  Those who end up dissatisfied are typically those who wish to contribute the most, so losing them is truly a loss for the organization.

If you want to progress, you need to retain your best members long enough to fully utilize their experience, while ensuring that new voices are heard and the organization remains capable of innovating.

What are the “dissatisfiers”?

It is my experience that board members leave service to the board for the following reasons:

  1. They don’t feel they are adding value.  Think about why good members serve. They want to make a difference.  If they don’t feel they are, they will take their time and talent elsewhere.  Are they listened to?  Are their novel ideas truly considered? Has the role of the board or its committees been compromised or suppressed by management? Can they say that the organization has been improved through their efforts?  If the answers are no, those who have real talent won’t stick around.

  2. Time is not valued.  Directors often complain that meetings take too long and that their time is not respected.  For real leaders, time is their scarcest commodity.  You have to respect their time and make every effort to minimize the time required. (I have written extensively on how to do this through use of committee, use of consent agenda, thoroughness of board packets, etc.)

  3. Politics suppresses dissent.  New directors often find that their voices are dismissed.  The power structure of the board, in concert with management, is not willing to look at new ideas or re-look at old ones.  They have a vested interest in what they have created and are threatened by questioning.  Sometimes the lesson learned by these new board members is “why bother?”

  4. Too long a ramp to become knowledgeable.  Often in board training sessions I hear complaints from the newer board members that they feel like “imposters” or “don’t know what’s going on”.  They sit through meeting after meeting, never having been properly oriented and not feeling comfortable to ask questions when everyone else seems to know the answer.  Rather than slow the group down, they go to meeting after meeting feeling lost and ineffective.

  5. Dysfunctional working relationship with CEO.  If the CEO is pursuing a strategy of dominating his/her board vs. establishing a true partnership to lead the organization, there is little chance that potentially effective board members will be highly satisfied.  Either party to the working relationship can be at fault here and it is a tough issue to confront.

  6. Core values of a director are violated.  Directors agree to serve on boards, especially non-profits, because they believe in the purpose and mission of the organization.  That mission taps into something that is core for the director, a cause worth donating time to.  With that commitment comes a belief on how it should be done, what’s OK to do and what is not OK to do.

For example, a friend of mine recently resigned from the board of an organization committed to child protection.  His resignation was prompted by frustration that he could not get the organization to commit to prevention vs. dealing with abuse or neglect that had reached the point where the child had to be removed from the home.  His core value is preventing kids from having to experience this in the first place and felt that he was stymied from being able to make that happen.

Core values can also be violated in the for-profit arena around issues such as environmental degradation or violation of good labor practices, child labor and the like.

We could go on and on with a host of reasons for why people leave boards. The key question at this point is, “what to do about it?”.

Proactively addressing turnover

A beginning point in understanding dissatisfaction that leads to turnover lies in knowing how directors feel about their service to the organization.  There are on-line surveys available to measure the level of board member satisfaction. We would also be happy to facilitate a confidential on-line process for you.

Follow-up is key. At a board retreat, you should take time to either talk about the results of such a survey and what changes are needed, or have an open discussion about level of satisfaction and what to do to improve it.

Some questions you might address in that dialogue.

      • What are the most rewarding aspects of your service on the board?
      • What are the sources of disappointment or frustration?
      • What do you not want to see changed?
      • What changes would increase your commitment to the board and this organization?

Alternatively, you could ask them about the sources of turnover I have listed above via survey or discussion.

There may be value in having this facilitated by an outside party rather than your board chairman as the behavior of the board chair may be one of the sources of frustration.

There is a distinction between a board satisfaction survey and a board self-evaluation.  The first addresses potential sources of turnover and potentially unhealthy dynamics that impede board performance.  The second evaluates the performance of the board itself.  The satisfaction survey can get at root causes.  It is important that a board do both on a scheduled basis.

The bottom line

What is your turnover rate?  What is your board members’ level of satisfaction?  When you can answer those questions and are happy with the answers, you are on your way to building a strong board. If you would like some help addressing turnover and board satisfaction within your group, we are happy to lend a hand. E-mail us to start the ball rolling.



Purpose vs. Politics

By Bill Dann, BoardGrowth Founder

I recently returned to work with a city council; providing a refresher on role and defining means by which council performance could be improved.  I learned something that day that I always sort of knew existed, but had never before had it so clearly demonstrated.

The Importance of Purpose and Focus

If you are interested in development of teams, I commend you to Peter Lencioni’s book, The Five Dysfunctions of a Team.  Lencioni makes clear that one of the prerequisites for a high performance team is a common purpose and focus.  Common purpose is essential, because without it, the needs and wants of the individual team member will take precedence in decision-making.  Commitment to purpose is defined as holding the mission of the organization as more important than the goals of your individual department.  Common focus is defined as a goal or accomplishment that everyone is trying to achieve and that is a priority over other considerations.

The Importance of Supporting Decisions

In my trainings and writing, I often talk about the ethical imperative that board/council members must support the decisions of the group, once made.  Speaking publicly or privately against a decision the group has committed to lowers the regard for the group in the minds of anyone to whom a board/council member is communicating their disagreement.  It communicates that there is disunity at best, and may depict incompetence at worst.

If the group is united in purpose and focus, it makes supporting the decisions somewhat easier.  After all, we are only arguing about the means, not the ends.  It is easier to disagree with the “how” without destroying the sense of teamwork.

As I was making this point, one of the council members vigorously defended another point of view.

The Political Imperative

In a political environment, it seems that always supporting recommendations brought by the chief executive, in this case, the city manager, is viewed as a sign of weakness and failure to stand up for the needs of citizens.

It goes back to one of the founding principles of our democracy, namely the separation of powers.  Citizens view their council to some degree as protecting them from government employees.  The inherent belief here is that the purposes of the governmental employees are not the same as those of the people.  That government, if unchecked, will take advantage of the people.

We certainly see this being played out in our national politics, but I had not expected to see this in small town America.  Not to this extent.

What the council member is saying is that he faces a dilemma (def. choice between two or more undesirable alternatives).  On the one hand, the choice is betrayal of the group (represented by arguing with the city’s chief executive before the audience and TV audience), and on the other is betrayal of the public (represented by always giving city management what they want).  The effect is that, at times, he is operating with a different sense of purpose and focus than is the group as a whole.

My Advice

I was able to fully see the point of view of this council member.  While I had seen this before, it had always come from board members who appeared to me to not be committed to the purpose of the organization, but rather to their own political agenda and for whom the strategy to get to power was to be destructive. That is to tear down the status quo and be viewed as a savior.   But this gentlemen was different.  He was thoughtful and committed to what was best for the community. For him, the dilemma was very real.

My response was to advise him to seriously consider the alternatives associated with this dilemma before making a decision.  To understand that not supporting the general will of the council in order to look good to constituents may result in city government as a whole losing support and confidence with its constituents.  That is, it could have the exact opposite effect of what he intends.  Thus, rather than reactively speak out against something in order to look good to constituents, look at the potential unforeseen consequences of doing so.

The Bottom Line

The lesson for me in this was to become more in tune with the political imperative that elected officials must contend with.  It is a different breed of cat than standard governance.  Definitely much more challenging.  It potentially poses real barriers to building a strong team.

Love to hear your thoughts. Drop me an e-mail.



The Dangers of Creating Enemies Within

By Bill Dann, BoardGrowth Founder

Key Distinction of an Enemy

Disagreements among board members are healthy. In fact, they support the purpose for having a board in the first place. That is, insuring that multiple viewpoints are heard and that no vital viewpoints are missed in reaching decisions for the group being served. What keeps these differing viewpoints moving forward positively is commitment to common purpose, vision, values. As long as the proposals before the board can be tied to maintaining or moving these forward, the group will find its way to an accord and remain a positive influence upon the organization.

But, an enemy is different. (Enemy: def. one who feels hatred toward, intends injury to, or opposes the interests of another.) What has switched is that opposition is no longer rational or even based in the issue. It is about paybacks.

Those of you who have experienced this phenomena in your group know how destructive this can be.

What creates an enemy

In my experience, I have seen two sources, and they are quite different:

Source 1 – Imposing Compromise
Alongside the organizational values that are stated and held in common by the group are the core values of the individual members. They are things like fairness, honesty, decency and the like. When the majority by vote imposes a decision upon an individual member that violates that member’s own core values, you sow the seeds of creating an enemy. You have become an enemy to what that individual is committed to. They can’t really defend that decision (even though it is their ethical obligation) and stay true to themselves, thus the group has become an enemy.

This individual over time will take one of three courses of action:

    • Seek to make up for the perceived damage of the wrongful decision by getting it reversed and/or by making a subsequent decision that makes up for the damage. If successful, then the individual can return to being a productive team member.
    • Leave the group that it no longer believes in.
    • Stay within the group, but actively undermine its effectiveness, i.e. do damage to one’s enemy.

Source 2 – Always Losing
One of the dangers of having a board dominated by individuals or even by a CEO is that there is little room left for its members to have an impact. Over time, they feel as if they are not contributing or worse that they are not respected. If the individual argues with the group or the CEO on a number of issues and always loses, there is a hidden scorecard in that individual’s mind. When the score gets too out of hand, i.e. the other side is continuously winning, the individual will do almost anything to even score. And, “almost anything” could be digging up dirt or spreading malicious rumors about those that dominate, so as to discredit them and reduce their dominance.

How to know you have an enemy?

I have described the dynamics well enough that you should be able to spot whether you have an enemy currently in your ranks. But, here is how you spot one in the making. Look for the following signs:

    • Disrespectful rolling of the eyes when someone else (usually a dominant player) is speaking
    • Sidebar conversations taking place when someone else (usually a dominant player) is speaking
    • Inappropriate emotion when defending a position, “why is Ralph so charged up over this?”
    • Secret caucuses on breaks

What you have here is someone whose button has been pushed, but who doesn’t want to make it known, as the perception is that they will be punished by the dominant forces. These signs represent efforts to regain favor and respect for opinion.

Some preventive steps you can take

  • Each member and, especially, the chair should monitor for situations in which what is being proposed seems to violate a core value of an individual. Get that person’s full consideration on how and why they feel violated by what is being proposed. Ask if the proposal could be modified so that it could be supportable. Avoid forcing a decision that you know will generate bad will, even if urgent for the enterprise.
  • Monitor your group dynamics to be certain that individuals are not dominating. The “know it all” or person viewed as having all the experience can be deadly to group dynamics. The chair should assure that everyone has a chance to speak on a issue. If you sense that an individual is dominating, give them this newsletter and counsel them as to the potential harm that could come of it, while still communicating your appreciation for what they bring to the table.
  • Beware when a member of the group goes silent, not participating in discussion of a key decision. When this happens, the Chair should state that h/she wants to hear from everyone on this issue before it comes to a vote and then proceed to go around the table and call on each person. Do not allow someone to speak more than once until everyone has spoken

Thoughts or questions? I would love to hear from you. Drop me an e-mail.